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Receivable turnover ratio or debtor's turnover ratio is an accounting measure used to measure how effective a company is in extending credit as well as collecting debts. The receivables turnover ratio is an activity ratio, measuring how efficiently a firm uses its assets .
The average collection period (ACP) is the time taken by businesses to convert their accounts receivable (AR) to cash. Credit sales are all sales made on credit (i.e. excluding cash sales). A long debtors collection period is an indication of slow or late payments by debtors.
Accounts Receivable / Total Annual Sales × 365 Days Average payment period [4] Accounts Payable / Annual Credit Purchases × 365 Days Asset turnover [21] Net Sales / Total Assets Stock turnover ratio [22] [23] Cost of Goods Sold / Average Inventory Receivables Turnover Ratio [24] Net Credit Sales / Average ...
In terms of financial ratios, accounts receivable turnover days declined by 1 day to 27 days, while inventory days decreased by 7 days to 80 days primarily due to shipment of N3 and N5 wafers ...
Vertical analysis is a percentage analysis of financial statements. Each line item listed in the financial statement is listed as the percentage of another line item. For example, on an income statement each line item will be listed as a percentage of gross sales. This technique is also referred to as normalization [6] or common-sizing. [5]
Accounts receivable represents money owed by entities to the firm on the sale of products or services on credit. In most business entities, accounts receivable is typically executed by generating an invoice and either mailing or electronically delivering it to the customer, who, in turn, must pay it within an established timeframe, called credit terms [citation needed] or payment terms.
Cashflows insufficient. The term "Cash Conversion Cycle" refers to the timespan between a firm's disbursing and collecting cash. However, the CCC cannot be directly observed in cashflows, because these are also influenced by investment and financing activities; it must be derived from Statement of Financial Position data associated with the firm's operations.
In double-entry bookkeeping, a sale of merchandise is recorded in the general journal as a debit to cash or accounts receivable and a credit to the sales account. [3] The amount recorded is the actual monetary value of the transaction, not the list price of the merchandise. A discount from list price might be noted if it applies to the sale.